Stagwell Inc: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis are based on and should be read in conjunction with our Unaudited Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2026 (the “Form 10-Q”). The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-Q. The following discussion and analysis also include a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable United States (“U.S.”) generally accepted accounting principles (“GAAP”) measures are below.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer to Stagwell Inc. and its direct and indirect subsidiaries. References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2026 means the period beginning January 1, 2026, and ending December 31, 2026).

Executive Summary

Overview

Stagwell conducts its business through its segments, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow, and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. We believe Stagwell’s differentiation lies in its digital-first and technology-based roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s strategy is intended to challenge the industry status quo, realize returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, staff cost ratio, capital expenditures, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share and the non-GAAP financial measures including Adjusted EBITDA, Free cash flow at consolidated level, and Adjusted EPS, as defined and described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by service line, (iv) growth from currency changes, and (v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our segments. These indicators may include the Company’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Company’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

Significant Factors Affecting our Business and Results of Operations

The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. We believe the two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.

Seasonality

Historically, we typically generate the highest quarterly revenue during the fourth quarter of each year. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. In addition, within our Communications segment, client concentration increases during election years due to the cyclical nature of our advocacy services.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

“Net revenue” refers to revenue excluding billable costs. The Company believes billable costs and their fluctuations are not indicative of the operating performance of its underlying business.

“Organic net revenue growth (decline)” reflects the year-over-year change in the Company’s reported net revenue attributable to the Company’s management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company’s reported net revenue.

The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company’s reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. Beginning with the quarter ended September 30, 2025, we calculate the impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity’s current period reported revenue as the impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present an amount equal to the entity’s current year net revenue for the same period during which we didn’t own the entity in the prior year as the impact of the acquisition in the current year. Previously, we calculated the impact of an acquisition as follows: (a) for an entity acquired during the current year, we presented the entity’s prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we presented the entity’s prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We believe that this change in the method of calculating the impact of an acquisition results in a measurement of organic net revenue growth (decline) that better reflects the effect of our management of an acquired entity by including the revenue of the acquired entity in such measurement after we have owned it for 12 months. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity’s prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity’s prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations.

The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company’s reported net revenue attributable to changes in foreign currency exchange rates. We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates.

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve Operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, impairment and other losses, and other items. Other items primarily includes restructuring, certain system implementation, working capital administrative fees and acquisition-related expenses. Adjusted EBITDA for our reportable segments is reconciled to Operating income (loss), as Net income (loss) is not relevant for reportable segment financial metric.

“Free Cash Flow” is defined as consolidated net cash flow from operations less cash outflow from capital expenditures and capitalized software, excluding material nonrecurring capital purchases.

“Adjusted Diluted EPS” is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items (as defined above), based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) the diluted weighted average shares outstanding. The diluted weighted average shares outstanding is calculated as (a) the diluted weighted average number of common shares outstanding plus (b) the shares of Class C common stock, par value $0.00001 per share (the “Class C Common Stock”) as if converted to shares of Class A Common Stock if not included because they were anti-dilutive.

All amounts are in U.S. dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.

The percentage changes included in the tables in Item 2 herein that are not considered meaningful are presented as “NM.”

Segments

The Company’s Chief Operating Decision Maker uses Adjusted EBITDA as a key metric to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.

On September 30, 2025, the Company reorganized its organizational structure to better reflect how the Company manages its business and goes to market, to simplify reporting and to provide clearer visibility into performance trends across its service offerings. The reorganization also seeks to enhance consistency in the Company’s portfolio of services and improve the transparency and comparability of financial information provided to investors.

As a result of the reorganization, the Company now has five operating and reportable segments: “Marketing Services,” “Digital Transformation,” “Media & Commerce,” “Communications,” and “The Marketing Cloud.” Prior period presented has been recast to reflect the reclassification of Brands within the reportable segments. Based on the segment analysis, management concluded that the operating segments do not exhibit similar economic characteristics or share other aggregation criteria. As a result, none of our operating segments are aggregated for reporting purposes. Further, as a result of the reorganization, certain reporting units have been redefined, and the composition of others has changed. The new structure fairly reflects the allocation of the Company’s resources, thereby improving comparability for investors and supporting the Company’s long-term strategic objectives. The composition of these segments is as follows:

• The Marketing Services segment delivers a broad range of services across four closely related client needs: creative, research, experiential, and social media solutions designed to build and elevate brands. Capabilities include developing breakthrough brand campaigns, providing consumer insights through advanced research methodologies, creating immersive experiential marketing programs and social engagement strategies that connect brands with audiences across digital platforms. By combining creative excellence, data-driven insights, and innovative experiences, Marketing Services empowers organizations to differentiate themselves in the marketplace, drive audience engagement, and achieve measurable business results. These services employ a wide variety of artificial intelligence (“AI”)-powered services in the delivery, such as AI-powered creative production and data analysis. Brands in this segment include, but are not limited to, creative agencies 72 and Sunny and Anomaly, research agencies NRG and Harris Insights, experiential agency TEAM, and social agency Movers & Shakers.
• The Digital Transformation segment designs, implements and activates modern digital ecosystems that enable brand and customer experiences through the integration of strategy, design, and technology. This segment helps clients modernize their digital infrastructure, enhance customer engagement, and accelerate enterprise transformation. Its capabilities span the delivery of digital products and experiences that connect brand storytelling with technology, including website and content development, digital campaigns, product and platform design, AI-native strategies and integration, and implementation of marketing technology (“MarTech”) products and solutions for customers. It also provides managed services, staff augmentation, and engineering expertise across various delivery models, offering system integration, full-stack development, and ongoing platform management. Additionally, Digital Transformation connects digital ecosystems to physical experiences through innovative, technology-driven customer engagements, such as business-to-business (“B2B”) platforms and multimodal activations that blend physical and digital environments using augmented reality (“AR”), virtual reality (“VR”), and emerging technologies. Together, these capabilities empower organizations to transform their digital presence and drive sustained business growth. Brands in this segment include, but are not limited to, strategy and design agencies Code and Theory and Instrument, development and implementation agency TrueLogic, and digital activation agency Left Field Labs.
• The Media & Commerce segment delivers integrated AI-based data solutions that drive audience engagement and business growth through media buying, owned media platforms, commerce enablement, and Customer Relationship Management (“CRM”) strategies. Its capabilities include planning and executing media campaigns across global platforms, leveraging data-driven approaches to optimize reach and effectiveness across first-party data, second-party data, and third-party data, and providing commerce and CRM tools that connect brands with consumers throughout the purchase journey. The segment also offers specialized media platforms and translation services to support targeted communication and market expansion. By combining expertise in media strategy, commerce activation, and audience analytics, Media & Commerce empowers organizations to maximize their marketing investments and achieve measurably efficient commercial outcomes. Brands in this segment include, but are not limited to, media buying and strategy agency Assembly Global, owned media platforms Reach TV, and commerce and CRM agency Gale.
• The Communications segment provides a leading edge set of solutions designed to help organizations build, protect, and enhance their reputation across diverse audiences and channels. Its capabilities include strategic communications, public relations, and advocacy services that leverage AI and data-driven insights to craft compelling narratives and influence public perception. The segment also offers expertise in targeted communications, corporate public affairs consulting, crisis management, and stakeholder engagement, ensuring clients can respond effectively to emerging

issues and opportunities. Advocacy services encompass strategic political campaign management, grassroots mobilization, and fundraising expertise that reach across the political spectrum. By combining deep industry knowledge with innovative digital approaches to media and advocacy, Communications empowers organizations to connect with key audiences, shape conversations, and achieve their strategic objectives. Brands in this segment include, but are not limited to, Allison, Consulum, SKDK and Targeted Victory.

• The Marketing Cloud segment delivers a comprehensive suite of technology solutions for in-house marketers, combining SaaS and DaaS offerings. Its key products cover a range of areas. Advanced research tools that enable real-time customer insights through syndicated and Do It Yourself (“DIY”) generative AI-drafted surveys, AI-driven text analysis, and predictive analytics. Communications technology that aggregates data from millions of sources, including news, social media, print, and TV/radio broadcasts, on a daily basis to monitor, analyze, and respond to market trends. Media studio products that leverage first-party, third-party, and proprietary data to provide actionable audience insights and attribution analytics and advanced media platforms that encompass audience engagement solutions such as AR, quick response (“QR”) codes, and loyalty programs, all designed to collect consumer data and generate actionable insights. Together, these capabilities empower marketers to understand, engage, and influence their audiences with precision and agility. Brands in this segment include, but are not limited to, QUEST, Unicepta, Holy Grail and Smart Assets.

“Corporate, eliminations and other” consists of revenue generated by the Other business components, elimination of certain intercompany revenue and expenses, and corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These corporate office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.

The following discussion focuses on the operating performance of the Company for the three months ended March 31, 2026 and 2025 and the financial condition of the Company as of March 31, 2026.

Results of Operations and Reconciliation of Net Loss to Adjusted EBITDA:

(dollars in thousands)

28

THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THREE MONTHS ENDED MARCH 31, 2025

Consolidated Results of Operations

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $704.1 million, compared to $651.7 million for the three months ended March 31, 2025, an increase of $52.4 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

For the three months ended March 31, 2026, organic net revenue increased by $8.8 million, or 1.6% reflecting net growth across the Digital Transformation and Communications segments, partially offset by net declines in Media & Commerce and The Marketing Cloud. Growth in Digital Transformation was driven by new client wins, expanded scope with existing clients, and increased demand for AI enabled offerings in the technology sector. Communications growth was primarily attributable to higher corporate public affairs revenue, election cycle fundraising growth, and early primary activity related to the 2026 election cycle. Within Media & Commerce and The Marketing Cloud, organic net revenue benefited from higher integrated media, technology, and data offerings as well as increased platform utilization and subscription-based services, however, these gains were more than offset by revenue declines in those segments related to the conflict in the Middle East.

The increase in net acquisitions (divestitures) was impacted by the prior year acquisitions of JetFuel Studio LLC and Powered by JetFuel LLC (collectively, “Jetfuel”), Create Group Holding Limited (“Create”), and ADK Global (“ADK”) which expanded the Company’s capabilities in experiential marketing, digital communications, and integrated marketing in Asia-Pacific (“APAC”) region, partially offset by the divestiture of a Brand in the Marketing Services segment.

The geographic mix in Net revenue for the three months ended March 31, 2026 and 2025 was as follows:

(dollars in thousands)

Expenses

Cost of services increased by $47.4 million. Excluding the increase in Billable costs of $32.0 million and the addition of expenses from acquired entities of $3.5 million, Cost of services increased $12.0 million primarily due to a $3.7 million increase in severance to reorganize the business, and higher staff costs to support the growth of the business.

Office and general expenses increased by $11.3 million. Excluding the addition of expenses of acquired entities of $4.7 million, Office and general expenses increased $6.6 million, primarily attributable to higher software license fees due to investments in automation and AI intended to improve workflow efficiency and support future margin expansion and higher staff costs to support the growth in the business and an increase in Deferred acquisition consideration expense as explained below.

Stock-based compensation increased by $2.7 million, primarily due to an increase in the fair value of certain profit interest awards driven by strong performance in certain Brands.

Deferred acquisition consideration increased by $3.6 million, primarily attributable to strong performance in certain acquired Brands, causing an increase in the fair value of the deferred acquisition consideration liability of those Brands, partially offset by a reduction in the fair value of the deferred acquisition consideration liability associated with certain other Brands driven by performance timing.

Operating Income

Operating income decreased by $8.6 million, as declines in the Media & Commerce segment and Corporate segment totaling $13.4 million were partially offset by a $6.0 million increase in the Communications segment. The decrease in Media & Commerce of $6.1 million was driven primarily by an $8.4 million increase in deferred acquisition consideration expense. The increase in Corporate’s Operating loss was primarily attributable to higher software license fees related to investments in automation and AI as well as higher staff costs to support business growth. These declines were partially offset by higher Operating income in Communications, reflecting an $8.7 million improvement, driven by corporate public affairs consulting revenue, election-cycle fundraising growth, early primary activity, and operational savings from a prior-year leadership restructuring.

Interest Expense, Net

Interest expense, net for the three months ended March 31, 2026 was $23.3 million, compared to $23.4 million for the three months ended March 31, 2025, a decrease of $0.1 million. This decrease was primarily attributable to a lower average interest rate, partially offset by higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 7 of the Notes to the Unaudited Consolidated Financial Statements included herein) used to support the growth in working capital attributable to the growth of Net revenue of the business.

Foreign Exchange, Net

The foreign exchange loss for the three months ended March 31, 2026, was $3.0 million, compared to a gain of $1.2 million for the three months ended March 31, 2025, primarily attributable to the movement in the British Pound, Canadian dollar and Euro.

Income Tax (Benefit) Expense

For the three months ended March 31, 2026, the Company recorded an income tax benefit of $2.9 million on a pre-tax loss of $16.7 million, resulting in an effective tax rate of 17.3%, compared to an income tax expense of $1.7 million on a smaller pre-tax loss of $3.6 million in the prior-year period, which resulted in an effective tax rate of negative 47.8%.

The effective tax rate increased by 65.1 percentage points compared to the prior‑year period, primarily due to a 49.1 percentage point increase from additional pre-tax losses, which were not subject to valuation allowances, for which we recorded a $3.9 million tax benefit, a 4.2 percentage point increase related to a corporate restructure for which the Company recorded a $0.7 million tax benefit, and an 11.8 percentage point increase from changes to other discrete tax items totaling less than $0.1 million tax impact.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of Noncontrolling and redeemable noncontrolling interests for the three months ended March 31, 2026 was a loss of $1.0 million, compared to a loss of $2.4 million for the three months ended March 31, 2025. The amounts were driven by the mix of income and loss derived from entities not entirely owned by the Company. Additionally, the change was driven by the Class C Exchange during the second quarter of 2025, which increased the loss allocated to Stagwell Inc.’s common shareholders.

Net Loss Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, Net loss attributable to Stagwell Inc. common shareholders for the three months ended March 31, 2026 was $13.0 million, compared to a net loss of $2.9 million for the three months ended March 31, 2025.

Adjusted EBITDA

Adjusted EBITDA increased by $7.4 million, or 9.0% and Adjusted EBITDA margin as a percentage of Net revenue expanded to 15.3% from 14.6%, driven primarily by improved performance in the Communications, Digital Transformation, and Media & Commerce segments, partially offset by higher costs in Corporate. Communications contributed $7.5 million of the increase, reflecting Net revenue growth of $5.8 million and a 5.2 percentage point improvement in the staff cost ratio as a percentage of Net Revenue, which drove margin expansion to 25.9% from 19.3%. This improvement was primarily attributable to operating leverage, where higher corporate public affairs consulting revenue, early-cycle fundraising growth, and early primary activity were delivered through a variable cost base. Digital Transformation contributed a $2.4 million increase in Adjusted EBITDA, supported by a $4.9 million increase in organic net revenue from AI-related services, and $3.2 million of incremental revenue from the acquisition of Create, partially offset by a $5.3 million increase in Staff costs. Media & Commerce contributed $2.1 million of incremental Adjusted EBITDA, with margin expanding to 10.3% from 9.1%, reflecting disciplined cost management. These increases were partially offset by a $6.7 million decline in Corporate, primarily due to higher software license fees related to investments in automation and AI and higher Staff costs to support standardized shared services platform to optimize cost structures and to support business growth.

Earnings Per Share

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2026 were as follows:

(amounts in thousands, except per share amounts)

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

(2) Represents the difference between the income tax benefit of $2.9 million at an effective tax rate of 17.3% on a GAAP basis and the income tax expense of $15.6 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2025 were as follows:

(amounts in thousands, except per share amounts)

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

(2) Represents the difference between the income tax expense of $1.7 million at an effective tax rate of (47.8)% on a GAAP basis and the income tax expense of $12.5 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.

Marketing Services

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $250.8 million, compared to $248.0 million for the three months ended March 31, 2025, an increase of $2.8 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

The increase in organic net revenue of $0.6 million, or 0.3%, was primarily attributable to an increase in the Research service line due to new client wins and expanded client relationships in the business services and automotive sectors driven by the accelerating adoption of AI, partially offset by broader industry headwinds on pricing. The decrease in net acquisitions (divestitures) was primarily driven by the divestiture of a Brand, partially offset by the prior year acquisition of Jetfuel, an experiential marketing services agency.

Expenses

Cost of services increased $8.5 million. Excluding the increase in Billable costs of $0.4 million and the decrease of expenses from acquired/divested entities of $0.9 million, Cost of services increased $9.0 million. This increase was primarily attributable to higher staff costs to support growth of business, increase in severance to reorganize the business and increase in stock-based compensation discussed below.

Stock-based compensation expense increased $2.5 million, primarily due to an increase in the fair value of certain profit interest awards driven by strong performance in certain Brands and a greater proportion of the annual incentive compensation being allocated to stock-based awards compared to last year.

Deferred acquisition consideration decreased $2.6 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands driven by the performance timing of those Brands.

Other items, net increased $5.4 million, primarily attributable to a lease termination during the first quarter of 2025 as part of the real estate consolidation initiatives resulting in a gain of $3.5 million and an increase in severance of $1.3 million.

Operating Income

Operating income decreased $2.7 million, primarily due to a non-recurring gain on lease termination of $3.5 million in the three months ended March 31, 2025, an increase in Staff costs of $4.3 million to support growth of business and higher Stock-based compensation expense of $2.5 million, partially offset by an increase in Net revenue primarily due to foreign currency fluctuations of $2.6 million and non-recurrence of $2.6 million in deferred acquisition consideration expense recognized in the prior year period.

Adjusted EBITDA

Adjusted EBITDA increased by $0.7 million, or 1.7%, reflecting Net revenue growth of $2.4 million, or 1.1% partially offset only by an increase in expenses.

Digital Transformation

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $101.5 million, compared to $90.9 million for the three months ended March 31, 2025, an increase of $10.6 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

The strong increase in organic net revenue of $4.9 million, or 5.6%, was attributable to an increase in the technology sector in the Development and Implementation and Digital Activation service lines, which grew $4.5 million driven by AI-related services. The increase in net acquisitions (divestitures) was primarily driven by the prior year acquisition of Create, a digital communications group in the Middle East.

Expenses

Cost of services increased $7.2 million. Excluding the increase in Billable costs of $2.6 million and the addition of expenses from acquired entities of $2.1 million, Cost of services increased $2.5 million, or only 4.8% compared to organic net revenue growth of 5.6%, reflecting strong operating leverage. This increase was primarily due to higher staff costs due to the growth in Net revenue, partially offset by the restructuring of agency teams to support business optimization efforts and the impact of competition in the labor market.

Operating Income

Operating income increased $1.3 million, or 10.3%, primarily attributable to organic net revenue growth of $4.9 million or 5.6% from an increase in AI-related services in the technology sector and the additional Net revenue from the Create acquisition of $3.2 million, or 3.6%. This increase was partially offset by an increase in Staff costs of $5.3 million or 9.0% to support the growth in Net revenue, and by an increase in Other items, net of $1.1 million, primarily due to restructuring costs. Operating margin increased from 14.4% to 14.6%, reflecting improved operating leverage.

Adjusted EBITDA

Adjusted EBITDA increased by $2.4 million or 10.2%. Adjusted EBITDA margin as a percentage of Net revenue expanded from 26.1% to 26.4% primarily driven by an increase in Net revenue of $8.0 million or 9.0%, partially offset by the increase in Staff costs of $5.3 million, or 9.0%.

Media & Commerce

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, were as follows:

(dollars in thousands)

37

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $174.5 million, compared to $160.4 million for the three months ended March 31, 2025, an increase of $14.1 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

Organic net revenue decreased by $1.0 million or 0.7%. Increases in the Media Buying service line were driven by integrated media, technology, and data offerings that contributed to new wins and expanded scope with existing clients and were offset by a decrease due to the conflict in the Middle East. The increase in net acquisitions (divestitures) was primarily driven by the prior year acquisition of ADK, an integrated marketing company that expands our global footprint in the APAC region.

Expenses

Cost of services increased by $11.2 million. Excluding the increase in Billable costs of $10.8 million and the addition of expenses from acquired entities of $2.0 million, Cost of services decreased $1.6 million, or 1.8%, compared to organic net revenue decrease of 0.7%.

Office and general expenses increased $8.3 million. Excluding the addition of costs from acquired entities of $2.4 million, Office and general expenses increased $5.9 million, primarily due to higher Deferred acquisition consideration as explained below.

Deferred acquisition consideration increased $8.4 million, primarily attributable to the strong performance of a certain Brand in 2026, causing an increase in the fair value of the deferred acquisition consideration liability associated with that Brand.

Operating Income (Loss)

Operating loss for the three months ended March 31, 2026 was $3.9 million, compared to income of $2.2 million for the three months ended March 31, 2025, representing a decrease of $6.1 million. The decrease in Operating income (loss) was primarily driven by the increase in Deferred acquisition consideration expense of $8.4 million driven by the strong performance of a certain Brand. Excluding the increase in Billable costs of $10.8 million and the addition of expenses from acquired entities of $2.0 million, Cost of services decreased $1.6 million, or 1.8%, compared to organic net revenue decrease of 0.7%, reflecting disciplined cost management.

Adjusted EBITDA

Adjusted EBITDA increased by $2.1 million, or 15.6%, primarily due to an increase in Net revenue, partially offset by an increase in Staff costs, as discussed above. Adjusted EBITDA margin as a percentage of Net revenue increased from 9.1% to 10.3%, reflecting disciplined cost management.

Communications

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $153.1 million compared to $129.1 million for the three months ended March 31, 2025, an increase of $24.0 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

The increase in organic net revenue of $4.8 million, or 5.3%, was primarily attributable to growth in corporate public affairs consulting and the commencement of primary campaigns ahead of the 2026 U.S. election cycle, new client wins and expanded scope with existing clients. This was partially offset by reduced client spending and competitive account losses in the consumer products vertical, delayed new engagement activity driven by geopolitical uncertainty in the Middle East and the non-recurrence of a prior year project timing benefits.

Expenses

Cost of services increased $19.1 million, primarily driven by $18.2 million increase in Billable costs reflecting higher pass-through activity. Excluding Billable costs, Cost of services increased only $0.8 million, or 1.6% compared to organic net revenue growth of 5.3%, reflecting deliberate headcount optimization and operational restructuring across the segment’s Brands, including the transition of certain functions to shared services and AI-driven workflow efficiencies.

Operating Income

Operating income increased $6.0 million, or 72.5%. The increase was primarily attributable to $8.7 million of improvement due to corporate public affairs consulting, election-cycle fundraising growth and early primary activity, as well as operational savings from a prior-year leadership restructuring, and the non-recurrence of $1.2 million in deferred acquisition consideration expense recognized in the prior year period. These increases were partially offset by $2.6 million in combined Operating income declines at our consumer-focused integrated communications and international strategic advisory services, reflecting the revenue headwinds discussed above.

Adjusted EBITDA

Adjusted EBITDA increased by $7.5 million, or 42.4%, reflecting Net revenue growth of $5.8 million, or 6.4%, combined with a 5.2 percentage point improvement in the staff cost ratio as a percentage of Net revenue, consistent with the expense efficiencies described above. Adjusted EBITDA margin as a percentage of Net revenue expanded to 25.9% from 19.3%, driven primarily by the operating leverage, where higher revenue from corporate public affairs consulting, election-cycle fundraising growth and early primary activity was delivered against a variable cost base.

The Marketing Cloud

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

40

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2026 was $26.5 million compared to $25.2 million for the three months ended March 31, 2025, an increase of $1.4 million.

The components of the fluctuations in Net revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

Organic net revenue remained relatively flat year over year due to growth in the Research service line due to increased demand from new and existing clients in the financial and business services sectors and higher platform utilization including the successful introduction of additional service offerings within a subscription model, offset by a decrease in the Communications Technology service line due to the conflict in the Middle East.

Expenses

Cost of services increased $3.1 million due to higher staff costs to support the expansion in the business.

Office and general expenses decreased $3.2 million, primarily due to lower staff costs and a decrease in Deferred acquisition consideration expense as explained below.

Deferred acquisition consideration decreased by $0.9 million, primarily due to an increase in the fair value of a certain Brand due to performance timing in 2025.

Operating Loss

Operating loss increased $0.3 million or 3.1%. The increase in Operating loss was primarily attributable to an increase in Depreciation and amortization of $1.7 million related to increased investments in AI and automation to expand our offerings and services and improve workflow efficiency, partially offset by an increase in Net revenue of $1.5 million due to foreign currency fluctuations and the non-recurrence of $0.9 million of Deferred acquisition expense recognized in the prior year. Operating margin improved 0.8 percentage points, reflecting improved operating leverage.

Adjusted EBITDA

Adjusted EBITDA increased by $1.0 million and Adjusted EBITDA margin as a percentage of Net revenue improved 4.3 percentage points, primarily due to an increase in Net revenue, as discussed above, combined with a 5.5 percentage point improvement in the staff cost ratio as the benefit of lower underlying staff costs partially offset the increase in cost of services to support business expansion.

Corporate

The components of operating results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were as follows:

(dollars in thousands)

Expenses

Staff costs increased by $3.3 million, primarily attributable to an increase in headcount to support the implementation of a standardized shared services platform to optimize cost structures and support future growth and higher healthcare-related insurance claims.

Administrative costs increased $3.4 million, primarily due to a $6.3 million increase in computer software and licensing fees reflecting investments in automation and AI intended to improve workflow efficiency and support future margin expansion, partially offset by a $2.9 million decrease resulting from a higher allocation of Corporate’s administrative costs to the Brands through the implementation of the shared services platform, which leverages Stagwell's scale and buying power to reduce overall costs and drive centralized service efficiencies reflected in the Brands’ income statements. These costs include rent, IT services, accounting services, financial operations services, and business applications.

Operating Loss

Operating loss for the three months ended March 31, 2026 was $29.6 million compared to $22.4 million for the three months ended March 31, 2025, representing an increase of $7.3 million, primarily attributable to higher expenses, as discussed above.

Liquidity and Capital Resources:

The following table provides summary information about the Company’s liquidity position and capital resources:

(dollars in thousands)

The Company had cash and cash equivalents of $114.9 million and $104.5 million as of March 31, 2026, and December 31, 2025, respectively.

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $26.5 million, a decrease of $33.5 million, or 55.9%, compared to the prior year. This was driven by a $27.5 million improvement in working capital primarily attributable to stronger working capital management driven by technology automation and improved billing and collection process, which resulted in favorable changes in advance billings of $47.4 million. Additionally, there were favorable changes in accounts payable of $17.3 million as a result of improved payment terms with significant service providers. This was partially offset by an unfavorable change in other current assets of $30.1 million due to an increase in certain prepaid media assets and unfavorable changes in expenditures billable to clients of $17.0 million and accruals of $36.5 million.

Changes in non-cash items consisted primarily of an increase in stock-based compensation of $2.7 million due to an increase in the fair value of certain profit interest awards driven by strong performance in certain Brands, a $3.6 million increase in the fair value of deferred acquisition liabilities driven by the performance timing of certain acquisitions, and an increase of $2.3 million in depreciation and amortization resulting from higher capital investment in AI and automation related technologies.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026 was $33.0 million, an increase of $12.7 million, or 62.3%, compared to the prior year. This increase was primarily driven by an increase in capital expenditures and capitalized software for investments in AI and process automation technologies of $4.9 million and $10.4 million, respectively.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2026 was $69.4 million, a decrease of $13.9 million compared to the prior year. This decrease was primarily driven by an increase in share repurchases of $29.7 million, partially offset by a decrease in payment of deferred consideration of $16.1 million.

Liquidity

The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt, equity and receivable financing. The Credit Agreement provides revolving commitments of up to $750 million and permits restricted payments for share repurchases or redemptions from certain of its stockholders. On March 27, 2026, the Company entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement that modified certain provisions of the Credit Agreement to expand the Company’s ability to borrow under its revolving credit facility in non-U.S. dollar currencies. Under the prior terms, borrowings denominated in British pounds sterling and Euros were each subject to individual sub-limits of $50.0 million, with an aggregate foreign currency sub-limit of $100.0 million. The amendment eliminated those individual currency sub-limits, allowing borrowings in U.S. dollars, British pounds sterling, Euros, and Canadian dollars up to the full revolving commitment, subject to overall facility availability. The amendment also established a framework for adding other currencies by mutual agreement among the Company and the lenders, subject to a sub-limit of $100.0 million. In addition, the amendment increased the annual limit on permitted restricted payments for repurchases or redemptions of the Company’s stock to $175.0 million per fiscal year from $100.0 million and increased the annual limit on permitted repurchases of equity interests from employees of the Company to $50.0 million per fiscal year from $15.0 million. As of March 31, 2026, the Company had $350.3 million of borrowings outstanding and $15.6 million of issued and undrawn letters of credit, resulting in $384.1 million unused borrowing capacity under the Credit Agreement.

The Company transfers certain of its trade receivable assets to third parties under certain agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.

The trade receivables transferred to the third parties were $169.1 million and $129.3 million for the three months ended March 31, 2026 and 2025, respectively. The amount collected and due to the third parties under these arrangements was $16.7 million and $21.2 million as of March 31, 2026 and December 31, 2025, respectively. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $1.8 million and $1.5 million for the three months ended March 31, 2026 and 2025, respectively.

The Company may purchase shares of outstanding Class A Common Stock under its Repurchase Program. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. Our Board of Directors will review the Repurchase Program periodically and may authorize adjustments of its terms.

During the three months ended March 31, 2026, 7.3 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $6.16 per share, for an aggregate value, excluding fees, of $44.9 million. The repurchased shares included 6.2 million shares of Class A Common Stock repurchased from executive officers and other employees at a price of $6.17 per share, for an aggregate purchase price of $38.2 million. Additionally, during the three months ended March 31, 2026, 1.2 million shares in the amount of $6.2 million were withheld for taxes from the Class A Common Stock vested during the period.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $356.2 million as of March 31, 2026.

The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of redeemable noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes (as defined in Note 7 of the Notes included herein) and Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement (“TRA”), which remains in effect after the final exchange of Class C Common Stock (see Note 13 of the Notes included herein for additional details). The amount and timing of any payments under the TRA are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize. Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under the Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods. The Company’s ability to make payments will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-Q and in the Company’s other SEC filings.

Total Debt

As of March 31, 2026, Debt, net of debt issuance costs, was $1,439.7 million, compared to $1,326.0 million outstanding as of December 31, 2025. See Note 7 of the Notes included herein for information regarding the Company’s 5.625% Notes and the Credit Agreement.

As of March 31, 2026, the Company was in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.

If the Company loses all or a substantial portion of its lines of credit under the Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity. If the Company were unable to find these sources of liquidity, for example, through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.

Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold. For the period ended March 31, 2026, the Company’s calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:

These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

Material Cash Requirements

To the extent required under a particular client engagement, Stagwell’s Brands enter into contractual commitments with media providers, production companies and other third parties on behalf of their clients at levels that exceed the revenue from the services. In most of these transactions, the Brands act as the clients’ “Agent for a Disclosed Principal” where the Brands’ risk is mitigated by sequential payment liability, i.e., the brands’ obligation to pay a third party is tolled until it receives the underlying payment from the client thereby safeguarding the Brand in the event of a client default. To further protect against client default, Stagwell takes additional precautions, including the procurement of credit insurance. While Stagwell has historically had a very low incidence of default, Stagwell is still exposed to the risk of significant uncollectible receivables from its clients, and the risk of a material loss could significantly increase in periods of severe economic downturn.

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent purchase price payments and retention payments tied to continued employment of specific personnel. See Note 6 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 8 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.

Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee with the right, but not the obligation, to sell their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. See Note 12 of the Notes included herein for additional information regarding these material commitments.

The Company enters into certain long-term non-cancellable contracts for services such as revenue or profit share arrangements, cloud-based services, or software licensing. See Note 9 of the Notes included herein for additional information regarding these material commitments.

Critical Accounting Estimates

See Note 2 of the Company’s 2025 Form 10-K for information regarding the Company’s critical accounting estimates.

Website Access to Company Reports and Information

Stagwell Inc.’s Internet website address is www.stagwellglobal.com (http://www.stagwellglobal.com). The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act, will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC. The Company announces material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, and its website. The Company uses these channels, as well as social media, including X (formerly Twitter) (@stagwell) and (@Mark_Penn), Instagram (@stagwellglobal) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, its products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information the Company makes public in these locations, as such information could be deemed to be material information. Information on or that can be accessed through the Company’s websites or these social media channels is not part of this Form 10-Q, and the Company’s website addresses and social media channels are included herein as inactive textual references only.

In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.

Debt Instruments: As of March 31, 2026, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the 5.625% Notes. The Credit Agreement bears interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication.

With regard to our variable rate debt, a 10% increase or decrease in interest rates would change our annual interest expense by $2.7 million.

Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies. The Company’s results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of its non-U.S. operations. The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 of the Company’s Audited Consolidated Financial Statements included in the 2025 Form 10-K. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This reduces the impact that fluctuations in exchange rates will have on profit margins. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net income (loss). From time to time, the Company may enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

See the Significant Accounting Policies section in the “Notes to Audited Consolidated Financial Statements” of the 2025 Form 10-K for information related to impairment testing for Goodwill, Right-of-use lease assets and long-lived assets and the risk of potential impairment charges in future periods. See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2025 Form 10-K for information related to the risk of potential impairment charges in future periods.

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rules 13a-15(b) and 15d-15(b) of the Exchange Act. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2026.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors in Part I, Item 1A “Risk Factors” of our 2025 Form 10-K. These risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks which we are subject to include the factors listed under note about “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.